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Expanding Taxes on Services

Updated: Friday, August 2 2013, 10:22 PM EDTState lawmakers are considering a proposal to expand taxes on services to raise revenue. The plan is being talked about by top legislators considering ways to reform North Carolina's tax code. Governor Pat McCrory has said tax reform is a top priority for his administration.

Right now, North Carolina taxes only about 40 services. But that number could increase by 130 if the plan becomes law. Among those that could be taxed; car washes, pet grooming, landscaping, health clubs, hair salons, painting, shoe repair and carpentry.

Business owners aren't happy with the plan. They say customers are already pinching dollars and making tough decisions. Elaine Beattie, owner of Curves in Arden says, "people are already making decisions about can I afford a club membership or will I need that money for medications."

Supporters say household consumption has changed, eroding the base of the state's tax system. Senator Bob Rucho says two thirds of household purchases are services and one third are taxed as tangible goods, the opposite of a generation ago.

Opponents argue the idea shifts the tax burden disproportionately from the wealthy to lower income taxpayers, who spend a larger share of their income on services.